Investing.com – The U.S. dollar weakened on Friday after U.S. President Donald Trump signaled he would call for lower interest rates, while the euro gained on better-than-expected economic activity data.

At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading 0.6% lower at 107.205, down more than 1% this week.

The dollar weakens after Trump’s comments

The dollar fell on Friday after Trump said in an online speech at the World Economic Forum in Davos, Switzerland, that he would call on the Federal Reserve to lower interest rates.

“I will demand an immediate reduction in interest rates,” he announced in a virtual speech. “They should be falling similarly around the world. Interest rates should follow us around the world.”

This likely suggests that pressure should not yet be felt at next week’s FOMC meeting, ING analysts said in a note. “We expect that the decision to keep interest rates constant next week will not be the reason for another round of slowdown in USD long positions.”

The U.S. currency has been on the defensive this week as Trump’s widely anticipated tariff announcements failed to materialize after his inauguration.

“This appears to confirm the growing sense that Trump is not pursuing protectionism compared to his pre-inauguration remarks, and that ultimately some of the tariff threats may not materialize until some trade concessions are made,” ING said.

The euro gains after PMI data

In Europe, up 0.8% to 1.0500, boosted by better-than-expected euro zone activity data for January as economic growth returned to the region.

The preliminary HCOB rate rose to 50.2 in January from 49.6 in December, slightly above the 50 mark separating growth from decline.

The index measuring the bloc’s dominant industry fell to 51.4 from 51.6 but remained above break-even, while the manufacturing PMI rose to 46.1 from a revised 45.1 and continued to decline.

The president of the European Central Bank is scheduled to speak in Davos later in the session, mentioning the need for gradual interest rate cuts early in the week, ahead of next week’s policy meeting.

“With high external uncertainty remaining and the prospects for cuts by the European Central Bank already taken into account, the arguments for a rebound in business confidence in the euro area in the miniature term are not very convincing. This should ultimately allow the ECB to stick to its plan to raise interest rates towards 2% this year,” ING said.

rose 0.7% to 1.2436, gaining after January’s PMI data was stronger than expected, boosting hopes for a gradual economic recovery.

The preliminary value of the S&P Global index rose to 50.9 in January from December’s 50.4, remaining in expansion territory.

The BOJ meeting promises to be a gigantic one

In Asia, shares fell 0.5% to 155.23 after a 25 basis point hike in interest rates earlier on Friday, with inflation forecast to remain stable and close to the annual target in the coming years.

The central bank has indicated that it plans additional interest rate increases if the economic outlook in the coming months is in line with expectations.

quotations fell 0.7% to 7.2385, with the Chinese currency supported by the prospect of the gradual imposition of US tariffs and Trump recently seemed more conciliatory.